Eliminate Free Checking? Not So Fast
March 04, 2010
As banks scramble to make up for lost overdraft-fee revenue this year, bank industry experts have predicted the demise of free checking. But an attempt by Citibank to start charging fees on its "free" accounts fell flat in New York, and other banks have been put on notice.
So is free checking here to stay? For a while, at least.
New York's Checking Account Investigation
Following an investigation by New York Attorney General Andrew Cuomo, Citibank agreed in early February to change its plan to charge fees on what were advertised as free checking accounts. Citibank, which had planned to start charging the fees starting February 1, will now extend the free checking benefits to customers who signed up for them in 2009 and for all of 2010 and will not charge any per-check fees until January 31, 2011.
The bank had advertised free checking for "EZ Checking" or "Access" checking accounts, as long as consumers used direct deposit or made two monthly online bill payments. Under the proposed fees, more than 1 million customers would have paid $7.50 or $9.50 monthly, or per-check charges of 50 cents or $1 after the first ten checks. The fees would have been applied to checking accounts with balances below $1,500.
Cuomo called the bank to task because free checking advertisements never disclosed that Citibank could terminate the free services at its discretion.
Banks Put On Notice about Changing Checking Accounts
Although the agreement applies only to Citibank, Cuomo sounded a warning to all banks in a conference call with reporters, saying his office will continue to scrutinize fees bank fees. He said banks can change fees, but only with reasonable notice, American Banker reported.
Meanwhile, MoneyRates.com's own most recent semi-annual survey of checking account fees showed that monthly maintenance fees actually fell in the last half of 2009.
Watch for Checking Account Fees
If you're in the market for a new checking account--if terms change unexpectedly or you feel you can get a better deal, for example--review the account details to learn about these and other fees:
- Monthly maintenance fees. Check whether you need to maintain a certain balance to dodge monthly maintenance fees. Some accounts still require no minimum balance to get free checking.
- ATM fees. Make sure you you have access to an ATM network that's convenient for you, and check how much you'll pay in fees for using out-of-network ATMs.
- Overdraft fees. Starting in the summer of 2010, the Federal Reserve will require that banks get your permission before they let you overdraw your account at an ATM and then charge you a fee for the privilege. Don't let yourself get talked into opting in for this expensive service. Monitor your account closely so you don't risk overdrawing, or sign up for an overdraft protection service that links your checking account to a savings account.
- Check fees. Are there fees for writing more than a certain number of checks each statement period? How much will you pay for paper checks?
Now with many online banks offering free and high-interest checking accounts, it pays to shop around for the best checking account deal.
